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EXHIBIT 10.9
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is dated this 13th day of
August, 1999 (the "Effective Date"), and entered into by and between Xxxxx X.
Xxxxxxxx (subsequently called the "Executive") and Convergent Group Corporation,
a Delaware corporation, having its principal office at 0000 Xxxxx Xxxxxxxx Xxx,
Xxxxx 000, Xxxxxxxxx, Xxxxxxxx 00000 (subsequently called the "Corporation"). In
consideration of the mutual promises and the terms and conditions set forth
below, the Executive and the Corporation (together, the "Parties," and each, a
"Party") agree as follows:
1. Nature and Purpose of Agreement. The laws of the State of Colorado
permit consultants to incorporate under the Colorado Corporation Code. The
Executive desires to practice consulting with and provide essential management
to the Corporation. The Board of Directors of the Corporation has determined the
reasonable method of compensation of the Executive and has offered him
compensation of an annual base salary and bonuses as set forth in Sections 3 and
4, participation in a 401(k) Plan in accordance with law, Key Man Insurance,
together with the other employee benefits generally set forth in the
Corporation's policies and procedures manual.
2. Employment; Term. The Corporation hereby employs the Executive as a
consultant and the Executive hereby agrees to be employed by the Corporation
under the terms and conditions set forth in this Agreement. The term of this
Agreement shall begin on the date hereof and shall end on December 31, 2002,
unless terminated prior to that date as provided herein.
3. Compensation and Benefits.
(a) For all services rendered by the Executive under this
Agreement, the Corporation shall pay compensation to the Executive consisting of
an annual base salary and an incentive bonus. The annual base salary effective
as of August 15, 1999, is $200,000. The Executive's annual base salary shall not
be reduced during the term of this Agreement and shall be subject to annual
adjustments as set forth herein. Effective on January 1 of each year during the
term of this Agreement, the Executive's annual base salary shall be increased by
5% of the amount in effect immediately prior to such adjustment. The Executive's
annual base salary shall be paid in twenty-six (26) bi-weekly payments during
each annual period.
(b) The Executive shall be entitled to participate in such life
insurance, disability, medical, dental, pension, profit sharing and retirement
plans and other programs as may be made generally available from time to time by
the Corporation for the benefit of executives of the Executive's level or its
employees generally (the "Benefits").
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4. Bonus Arrangements.
(a) Bonus Opportunity. The Corporation and the Executive
acknowledge that the Executive is critical to the success of the Corporation
both as a consultant for the Corporation and as an essential part of the
management of the Corporation. The Corporation desires to retain the Executive
and ensure that the Executive receives reasonable compensation for his critical
role. The Corporation therefore agrees to pay the balance of the Executive's
reasonable compensation by way of a an Incentive Bonus (as defined below).
(b) Incentive Bonus. Commencing with calendar year 1999, the
Executive shall be eligible to earn an "Incentive Bonus" for each year in
addition to his annual base salary. The targeted amount of the Incentive Bonus
shall be 50% of the amount of the Executive's annual base salary as in effect
for such year (the "Bonus Target"). Two-thirds of the Incentive Bonus shall be
earned based upon the attainment by the Corporation of targeted revenue during
the period (the "Revenue Bonus"), and one-third of the Incentive Bonus shall be
earned based upon the attainment by the Corporation of targeted margins during
the period (the "Margins Bonus"). The revenue and margins targets used for
purposes of determining the Revenue Bonus and the Margins Bonus shall be set
forth in the Executive's Annual Operating Plan (as defined in Section 4(d)
below). Separate calculations shall be made with respect to each of the Revenue
Bonus and the Margins Bonus. Notwithstanding anything herein to the contrary,
the Corporation must achieve more than 90% of the targeted revenue or margins,
whichever is being tested, during the period for the Executive to receive a
bonus with respect to that component. To the extent that the Corporation
achieves 90% or more of the target, the Executive shall be entitled to receive
an Incentive Bonus based upon the following formula:
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Percentage Attainment of Targeted Revenue or Margins (each tested separately)
for the Period
(Determined to the Nearest Hundredth of a Percent)
Minus
-----
90
Divided By
----------
10
For example, if the Corporation achieves 95% of the targeted revenue and 85% of
the targeted margins as set forth in the Executive's Annual Operating Plan for
the period, the Executive shall receive 33.33% of the Bonus Target, determined
as follows:
Bonus Target for Revenue = 66.67% of total Bonus Target ("Revenue Target")
% of Revenue Target = (95-90) / 10 = 50%
% of total Bonus Target from Revenue = 66.67% x 50% = 33.33%
Bonus Target for Margins = 33.33% of total Bonus Target ("Margins Target")
% of Margin Target = 0% (performance below 90%)
% of total Bonus Target from Margins = 33.33% x 0% = 0%
% of total Bonus Target from Revenue and Margins = 33.33% + 0% = 33.33%
Notwithstanding anything herein to the contrary, for the year 1999, (i) the
Bonus Target shall be $41,667, which is 50% of the Executive's base salary for
the period August 1, 1999 through December 31, 1999 ($83,333), and (ii) the
amount of the Incentive Bonus earned by the Executive shall be determined based
upon actual revenues and margins and targeted revenues and margins for the
entire calendar year 1999.
(c) Payment of Incentive Bonuses. The entire amount of the Revenue
Bonus up to 100% of the Revenue Target amount and the entire amount of the
Margins Bonus up to 100% of the Margins Target amount (each determined
separately) shall be paid in cash or by check. To the extent the Revenue Bonus
or the Margins Bonus exceeds 100% of the Revenue Target or the Margins Target,
as applicable, one-third of such excess amount shall be paid in cash or by
check, and the remaining two-thirds shall be paid by the issuance to the
Executive of a nonqualified stock option (the "Option") to purchase Common Stock
of the Corporation, par value $0.001 per share ("Common Stock"). The cash amount
of the Incentive Bonus shall be paid, and the Option portion of the Incentive
Bonus shall be issued, within ten (10) days after the Calculation Date (as
defined herein). In any event, the effective date of the grant of the Option
shall be the last day of the period for which the Incentive Bonus was
calculated. The exercise price per share of the Option shall be twenty-five
percent (25%) of the Fair Market Value per share of the Common Stock as of the
last day of the period for which the
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Incentive Bonus was calculated. For purposes of this Section 4(c), Fair Market
Value per share shall be determined in accordance with Section 4(e). The number
of shares subject to the Option shall be determined by dividing the dollar
amount of the Incentive Bonus payable in the form of the Option by an amount
equal to seventy-five percent (75%) of the Fair Market Value per share of the
Common Stock as of the last day of the period for which the Incentive Bonus was
calculated. The Option shall be fully vested and exercisable as of the date of
its grant and shall have a ten (10) year term. An example of the above
calculation is as follows: Assume the Revenue Bonus exceeds the Revenue Target
by $50,000. Assume further that the Fair Market Value per share is $12.00. The
exercise price per share would be $12.00 x .25, or $3.00. The number of shares
subject to the Option would be ($50,000 x .667%) / ($12.00 x .75), or 3,704
shares.
(d) Executive's Annual Operating Plan. On or before December 15 of
the preceding calendar year, the Executive and the Chief Executive Officer of
the Corporation (or the Chief Executive Officer's designee) shall prepare in
good faith and submit to the Board of Directors, and the Board of Directors
shall adopt, annual revenue and margins targets for the operations of the
Corporation for which the Executive is responsible. Such annual revenue and
margins targets shall be based upon the Corporation's annual business plan. Upon
adoption by the Board of Directors by a majority vote, provided that the Chief
Executive Officer of the Corporation (the "CEO") and at least one of the members
of the Board of Directors designated by the Investors, as such term is defined
in that certain Recapitalization Agreement (the "Recapitalization Agreement") by
and among the Corporation and the additional parties named therein dated as of
August 13, 1999 (each, an "Investor Director") in accordance with the
Shareholders' Agreement (the "Shareholders' Agreement) by and among the
Corporation and the parties named therein dated as of August 13, 1999 (assuming
that there are then such members on the Board of Directors) must have voted in
favor of adoption thereof, such revenue and margins targets shall be the
"Executive's Annual Operating Plan" for purposes of this Agreement. If the Board
of Directors (including the CEO and at least one Investor Director) fails to
approve the annual revenue and margins targets as set forth herein, the targets
for the prior year multiplied by 140% shall be the "Executive's Annual Operating
Plan" for purposes of this Agreement. Notwithstanding the foregoing, the
Executive's Annual Operating Plan to be used for purposes of calendar year 1999
shall be as set forth in Exhibit B to this Agreement.
(e) Determination of Fair Market Value. If the Common Stock is
listed upon an established stock exchange or exchanges, then the Fair Market
Value per share shall be deemed to be the average of the quoted closing prices
of the Common Stock on such stock exchange or exchanges on each of the thirty
(30) days immediately preceding the day for which the determination is made. If
the Common Stock is not listed upon an established stock exchange but is traded
in the NASDAQ National Market System, the Fair Market Value per share shall be
deemed to be the average of the closing prices of the Common Stock in the
National Market System on each of the thirty (30) days immediately preceding the
day for which the determination is made. If the Common Stock is not listed upon
an established stock exchange and is not traded in the
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National Market System, the Fair Market Value per share shall be deemed to be
the average of the mean between the dealer "bid" and "ask" closing prices of the
Common Stock on the NASDAQ System on each of the thirty (30) days immediately
preceding the day for which the determination is made. If none of these
conditions apply, Fair Market Value shall be the amount (the "Formula Price")
determined as follows: (i) if the date of determination is on or before the date
which is six (6) months after the closing of the transactions contemplated by
the Recapitalization Agreement, an amount equal to $1.085 per share, subject to
equitable adjustment in the event of any increase or decrease in the shares of
Common Stock by way of stock split, share reclassification, stock dividend or
other similar transaction, or (ii) if the date of determination is after the
date which is six (6) months after the closing of the transactions contemplated
by the Recapitalization Agreement, the fair value of each share determined by
multiplying EBITDA for the twelve month period ending on the day for which the
determination is made times an industry multiple equal to the average multiples
of a list of ten comparable, publicly-traded companies, which list has initially
been determined by mutual agreement of the CEO and InSight Capital Partners.
Such list shall be revised each year on January 1 upon the mutual agreement of
the CEO and InSight Capital Partners. A minority/liquidity discount of 20% shall
be applied in the Formula Price pursuant to clause (iii) above.
(f) Determination of Revenues and EBITDA. For purposes of this
Agreement, "EBITDA" means earnings before interest, taxes, depreciation and
amortization("EBITDA"); provided, however, that notwithstanding anything herein
to the contrary, EBITDA shall be adjusted as necessary to exclude the effects of
(i) the payment of transaction costs associated with the consummation of the
transactions contemplated by the Recapitalization Agreement, which shall include
but not be limited to bank fees, finance fees, legal fees, accounting fees, and
any other similar types of fees or expenses; (ii) the payment of transaction
costs associated with the consummation of a major capital event such as a sale
of all or substantially all of the Corporation's stock or assets, a merger or
consolidation, or an initial public offering; and (iii) payment of any
"Transaction Fee" or "Management Fee", as those terms are defined in the
Shareholders' Agreement. When calculated for a full calendar year, revenues,
margins, and EBITDA shall be as determined in connection with the preparation of
the Corporation's audited financial statements for the year, which statements
shall be prepared in accordance with generally accepted accounting principles
consistently applied as in effect from time to time in the United States. When
calculated for any period which is less than a full calendar year, revenues,
margins, and EBITDA shall initially be determined in connection with the
preparation of the Corporation's unaudited financial statements for such period,
which statements shall be prepared in accordance with generally accepted
accounting principles consistently applied as in effect from time to time in the
United States and shall be certified by the Corporation's Chief Financial
Officer. When an Incentive Bonus is calculated for a partial year as described
above, fifty percent (50%) of such Incentive Bonus (including both cash and
options, pro-rata) shall be paid or issued immediately to the Executive and the
remaining fifty percent (50%) shall be retained by the Corporation until the
regular audit of the financial statements for such
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year has been completed. The amount of the Incentive Bonus for such period shall
then be re-determined based upon the Corporation's audited financial statements,
and the Corporation shall pay and issue to the Executive any shortfall, and the
Executive shall refund or return for cancellation to the Corporation any
over-payment, based upon the amount of the Incentive Bonus as re-determined and
the amount previously paid and issued. Revenues, margins, and EBITDA for a full
calendar year period shall be determined within fifteen (15) days after the
release of the Corporation's audited financial statements. Revenues, margins,
and EBITDA for a period which is less than a full calendar year shall be
determined within fifteen (15) days after the end of the month in which such
period terminates. The date by which revenues, margins, and EBITDA are to be
determined or re-determined is referred to as the "Calculation Date." The
Corporation shall use its best efforts to cause audited financial statements
prepared by an independent certified public accountant to be released no later
than April 15th of the following year. The Corporation shall notify the
Executive of the amount of the Incentive Bonus no later than five (5) days after
the Calculation Date.
(g) Determination of Incentive Bonus Following Termination of
Employment. In the event of the termination of the Executive's employment by the
Corporation for Cause (as defined in Section 20(a)), or by the Executive without
Good Reason (as defined in Section 20(c)) the Executive shall be entitled to
receive an Incentive Bonus for any calendar year concluded prior to such
termination of employment but shall not be entitled to receive an Incentive
Bonus for the calendar year in which such termination of employment occurs. In
the event of the termination of the Executive's employment for any reason other
than by the Corporation for Cause or by the Executive without Good Reason,
including without limitation the Executive's death or disability, the Executive
shall be entitled to receive an Incentive Bonus both with respect to any
calendar year concluded prior to such termination of employment and with respect
to the calendar year in which such termination of employment occurs. The amount
of the Bonus Target for a year in which a termination occurs shall be prorated
based upon the amount of the Executive's base salary which accrued during the
portion of the year during which the Executive was employed by the Corporation,
and the amount of the Incentive Bonus shall be determined based upon actual
revenues and margins and targeted revenue and margins under the Executive's
Annual Operating Plan for that year through either the end of the calendar month
in which the termination occurs or the end of the preceding calendar month,
whichever is more favorable to the Executive.
5. Executive's Duties. The Executive is employed on a full-time basis
as a consultant and as an essential member of the management of the Corporation.
So long as this Agreement is in effect, the Executive will not engage in the
practice of consulting except as an Executive of the Corporation unless
otherwise authorized in writing by the Board of Directors of the Corporation.
Any and all compensation received in money or other property from any person or
entity other than the Corporation for professional services rendered by the
Executive shall be deemed to be the property of the Corporation. The Executive
agrees that upon the receipt of any such money or property, he shall promptly
remit such compensation to the Corporation together with a
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full accounting thereof. So long as this Agreement is in effect, the Executive
shall be appointed the Executive Vice President of the Corporation.
6. Facilities. The Corporation shall furnish facilities, equipment,
services and assistance suitable to the Executive's position for the performance
of the Executive's duties.
7. No Copies of Documents and Materials. The Executive shall not
(except in the performance of his duties in the ordinary course of business for
which he is employed by the Corporation) at any time or in any manner make or
cause to be made any copies, pictures, duplicates, facsimiles or other
reproductions or recordings or any abstracts or summaries of any reports,
studies, memoranda, correspondence, manuals, records, plans or other written,
printed, computerized or otherwise recorded materials of any kind or nature
whatsoever belonging to or in the possession of the Corporation or any of its
subsidiaries.
8. Materials Remain on Premises. The Executive shall have no right,
title or interest in any material referenced in Section 7. The Executive agrees
that, except in the performance of his duties in the ordinary course of business
for which he is employed by the Corporation, the Executive will not, without the
prior written consent of the Corporation, remove any such material from any
premises of the Corporation. The Executive further agrees that, immediately upon
the termination of his employment with the Corporation or upon the termination
of this Agreement, whichever occurs earlier, or at any time prior thereto upon
the request of the Corporation, he shall surrender all such material to the
Corporation and execute a document acknowledging that he has complied with the
provisions of this Agreement.
9. Trade Secrets. The Executive shall not at any time, whether during
or after the term of this Agreement, use for the Executive's own benefit or
purposes or for the benefit or purposes of any other person, firm, partnership,
association, corporation or business organization, entity or enterprise, or
disclose (except in the performance of his duties in the ordinary course of
business for which he is employed by the Corporation) in any manner to any
person, firm, partnership, association, corporation or business organization,
entity or enterprise any trade secret, information, data, know how or knowledge
(including, but not limited to, that relating to service techniques, purchasing
organization and methods, sales organization and methods, inventories, client
lists, market development and expansion plans, personnel training and
development programs and client and supplier relationships) or any other
Discoveries (as defined in Section 11) belonging to or relating to the affairs
of the Corporation or any of its subsidiaries or to the clients of the
Corporation or any of its subsidiaries; provided, however, that this Section 9
shall not apply to any trade secret, information, data, know how, knowledge, or
Discovery that is or becomes generally available to the public through no fault
or action of the Executive.
10. Customers. In furtherance of and not in limitation of Section 9,
the Executive acknowledges that the list of the Corporation's and its
subsidiaries' customers
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as it may exist from time to time constitutes a valuable and unique asset of the
Corporation, and the Executive agrees that he shall not, during or after the
term of his employment, disclose such list or any part thereof to any person,
firm, partnership, association, corporation, or business organization, entity or
enterprise for any reason or purpose whatsoever, nor shall the Executive use
such customer list for his own benefit or purposes or for the benefit or
purposes of any business with whom the Executive may become associated.
11. Discoveries. The Executive agrees with the Corporation that any and
all inventions, discoveries, improvements, designs, methods, systems,
developments, know how, ideas, suggestions, devices, trade secrets and processes
(hereinafter collectively referred to as "Discoveries"), whether patentable or
not, which are discovered, disclosed to or otherwise obtained by the Executive
during his employment with the Corporation are confidential, proprietary
information and are the sole and absolute property of the Corporation. The
Executive agrees to disclose promptly to the Corporation all such Discoveries
and to assist the Corporation in making any application in the United States and
in foreign jurisdictions for patents of any kind with respect thereto.
12. Works for Hire. All works and writings of a professional nature
which are produced by the Executive during his employment with the Corporation
constitute works made for hire and are the sole and absolute property of the
Corporation. The Executive grants the Corporation the exclusive right to
copyright all such works and writings in the United States and in foreign
jurisdictions. To the extent any such works or writings are deemed to not be
works for hire, the Executive hereby assigns and agrees to assign all his
interests therein to the Corporation or its nominee. Whenever requested to do so
by the Corporation, the Executive shall execute any and all applications,
assignments, or other instruments that the Corporation may deem necessary to
protect the Corporation's interest therein.
13. Non-Competition.
(a) The Executive acknowledges that his employment as a member of
the Corporation's executive management team creates a relationship of confidence
and trust between the Executive and the Corporation with respect to confidential
and proprietary information applicable to the business of the Corporation, its
subsidiaries and its clients. The Executive further acknowledges the highly
competitive nature of the business of the Corporation. Accordingly, the
Corporation and the Executive agree that the restrictions contained in this
Section 13 are reasonable and necessary for the protection of the immediate
interests of the Corporation and that any violation of these restrictions would
cause substantial injury to the Corporation.
(b) For purposes of this Agreement, the term "Competitive
Business" means any person, firm, partnership, association, corporation, or
business organization, entity or enterprise which derives or which expects
during the following two (2) years to derive either (i) ten percent (10%) or
more of its revenues, or (ii) more than $10,000,000 in revenues from providing
technical management consulting and/or systems integration
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services for Automated Mapping/Facilities Management Systems and/or Geographic
Information Systems and/or utility transmission and distribution systems. The
term "Competitive Business" is not intended to include mere vendors or suppliers
of the Corporation.
(c) For purposes of this Agreement, the term "Existing Client"
means a client for whom the Corporation or any of its subsidiaries is performing
consulting services as of the date of the termination of the Executive's
employment with the Corporation or for whom the Corporation or any of its
subsidiaries performed consulting services within the two (2) year period
immediately preceding the termination of the Executive's employment with the
Corporation. The term "Existing Client" is not intended to include mere vendors
or suppliers of the Corporation.
(d) During the Executive's employment with the Corporation and for
a period of one (1) year following the termination of the Executive's employment
with the Corporation for any reason other than termination occasioned by the
expiration of this Agreement (provided, however, that if the termination occurs
prior to August 13, 2000, for any reason other than by the Executive for Good
Reason, such period shall continue for two (2) years), the Executive shall not
(nor shall the Executive cause, or provide assistance to anyone else to):
i. Employ or otherwise engage, or attempt to employ or
otherwise engage, in or on behalf of the Executive or any Competitive Business,
any person who is employed or engaged as an employee, consultant, agent or
representative of the Corporation or any of its subsidiaries as of the date of
the Executive's termination or at any time during the one-year period following
such termination; or
ii. Solicit directly or indirectly on behalf of the Executive
or any Competitive Business, the customer business or account of any Existing
Client of the Corporation.
(e) If any court shall determine that the duration, geographic
limitations, subject or scope of any restriction contained in this Section 13 is
unenforceable, it is the intention of the Parties that this Section 13 shall not
thereby be terminated but shall be deemed amended to the extent required to make
it valid and enforceable, such amendment to apply only with respect to the
operation of this Section 13 in the jurisdiction of the court that has made the
adjudication.
(f) Notwithstanding anything herein to the contrary, the
provisions of this Section 13 shall not be applicable to any termination which
occurs after December 31, 2002.
14. Employability. The Executive recognizes and acknowledges that he
has sufficient abilities and talents to be able to obtain, upon the termination
of this Agreement, comparable employment from another business organization or
entity while fully honoring and complying with the above covenants concerning
confidential
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information and contacts with the Corporation's or any of its subsidiaries'
existing customers or employees. The Executive recognizes and acknowledges the
importance to the Corporation and its subsidiaries of the above covenants and,
therefore, agrees that, for a period of one (1) year following the termination
of the Executive's employment with the Corporation and upon the Corporation's
reasonable request of the Executive, he will advise the Corporation of the
identity of his new employer and will provide a general description, in
reasonable detail, of his new duties and responsibilities sufficient to inform
the Corporation of its need to request a court order to enforce the above
covenants.
15. Remedies. The Executive acknowledges and agrees that the provisions
of this Agreement are essential to the Corporation and are reasonable and
necessary to protect the legitimate interests of the Corporation and its
subsidiaries and that the damages sustained by the Corporation or its
subsidiaries as a result of a breach of the agreements contained herein will
subject the Corporation or its subsidiaries to immediate, irreparable harm and
damage, the amount of which, although substantial, cannot be reasonably
ascertained, and that recovery of damages at law will not be an adequate remedy.
The Executive therefore agrees that the Corporation and its subsidiaries, in
addition to any other remedy they may have under this Agreement or at law, shall
be entitled to injunctive and other equitable relief to prevent or curtail any
breach of any provision of this Agreement. In the event suit or action is
instituted to enforce this Agreement or any of the terms and conditions hereof,
including, but not limited to, suit for preliminary injunction, the prevailing
Party shall be entitled to costs and reasonable attorneys' fees. The Executive
waives any right to the posting of a bond in the event of an issuance of a
temporary restraining order, preliminary injunction or permanent injunction upon
the issuance of said order by a court of competent jurisdiction.
16. Expenses. In the promotion and execution of the business of the
Corporation, the Executive is expected to incur certain reasonable expenses for
entertainment, travel, company automobile expenses (including insurance,
maintenance, fuel and depreciation, if applicable), and business fax and
telephone bills which shall be subject to approval by the Corporation. The
Corporation recognizes the necessity for such expenditures in order to retain
and further the professional skills, abilities and standing of the Executive and
to properly maintain, promote and develop the Corporation's consulting practice.
The Corporation shall pay all reasonably appropriate and necessary premiums on
life insurance owned by the Corporation on the life of the Executive, and shall
reimburse the Executive for insurance premiums paid by the Executive for a
policy providing a death benefit of four million dollars ($4,000,000) to the
Executive's estate or designated beneficiary. Such reimbursement shall be
"grossed-up" based upon the highest combined federal and applicable state
marginal tax rate in effect (assuming that the Executive is married and filing a
joint return) on the date of payment. The Corporation shall also pay the
Executive's dues and fees for attending professional meetings and institutes,
costs of professional books and periodicals and promotion, entertainment and
travel expenses reasonably related to the business of the Corporation. The
Corporation shall also pay the Executive's business-related legal,
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accounting and financial planning fees, up to a maximum of $20,000 per calendar
year. All payments made by the Corporation pursuant to this Section 16 shall be
made in a manner consistent with the Corporation's practices in years prior to
the execution of this Agreement. Unusual and extraordinary expenses incurred by
the Executive and not approved in advance by the Corporation may not be
reimbursed.
17. Vacation Leave Time. Vacation leave shall accrue at the rate of six
(6) weeks per year. Any unused vacation leave time accumulated during the year
shall carry over to subsequent years.
18. Disability. The Corporation may terminate this Agreement upon
written notice to the Executive if the Executive is physically or mentally
incapacitated and unable to perform his duties under this Agreement for a period
of (i) any one hundred eighty (180) days out of any three hundred sixty (360)
days, if the Common Stock of the Corporation is not then publicly traded, or
(ii) ninety (90) out of any one hundred eighty (180) days if the Common Stock of
the Corporation is then publicly traded. If at any time a question arises as to
the incapacity of the Executive, then the Corporation shall promptly employ one
physician who is a member of the American Medical Association and who is
mutually agreeable to the Corporation and the Executive to examine the Executive
and determine if his physical and/or mental condition is such as to render him
unable to perform his duties under this Agreement. The decision of the physician
shall be certified in writing to the Corporation, shall be sent by the
Corporation to the Executive or his representative and shall be conclusive for
purposes of this Agreement. Any compensation payments payable to the Executive
hereunder shall be reduced by the amount of any disability payments the
Executive receives as a result of disability policies on which the Corporation
has paid the premiums.
19. Death During Employment. This Agreement shall terminate upon the
Executive's death. In such event, the Corporation shall pay a death benefit
equal to the Executive's base monthly salary for the balance of the month of the
Executive's death and for the month following his death. Any amounts payable
under this Agreement following the Executive's death shall be paid to the
beneficiary named in writing by the Executive, or if none, to the Executive's
surviving spouse, or if none, to the executors and administrators of the
Executive's estate and shall be paid within sixty (60) days of the Executive's
death.
20. Termination for Other Than for Disability or Death. This Agreement
may terminate for reasons other than the Executive's disability or death upon
the occurrence of any of the following events; provided, however, that neither
the Executive nor the Corporation may terminate this Agreement pursuant to this
Section 20 in 1999 except for a termination by the Corporation for Cause as
provided in Section 20(a) or a termination by the Executive for Good Reason as
provided in Section 20(c).
(a) The Corporation, at its option, may terminate the Executive
for Cause (as defined below) upon thirty (30) days' advance written notice by
the Corporation to the Executive fully setting forth such Cause, which notice of
termination
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may be appealed to the Board of Directors of the Corporation. Termination shall
be effective on the thirtieth (30th) day following the Executive's receipt of
written notice from the Corporation. "Cause" shall be limited to a situation in
which the Executive has:
i. Committed a criminal offense that, if committed in the
State of Colorado, would have constituted a felony under the laws of the State
of Colorado or the United States (other than a traffic offense or other similar
violation); or
ii. Committed a fraudulent act which is materially harmful to
the Corporation (materiality, for purposes of this clause, means in excess of
$50,000); or
iii. Committed an act of willful misconduct which results in
actual damages against the Corporation of $500,000 or more; or;
iv. Committed an act of gross insubordination by refusing to
obey written directions of the Board of Directors (so long as such directions do
not involve illegal or immoral acts), which refusal continues for a period of
ten (10) days after written notice to the Executive by the Corporation which
notice references such refusal and this Section 20(a); or
v. Committed repeated acts of alcohol or illegal drug abuse,
and has failed to take reasonable steps to address such issues within ten (10)
days after written notice to the Executive by the Corporation which notice
references such acts and this Section 20(a); or
vi. Except during periods of vacation leave permitted
pursuant to Section 17, failed to devote substantially all of his professional
time and attention to the performance of his obligations under this Agreement,
as determined by the Board of Directors of the Corporation, which failure
continues for a period of fifteen (15) days after Actual Receipt (as defined in
Section 20(b) below) of written notice by the Executive from the Corporation
which notice references such failure and this Section 20(a).
(b) The Corporation shall have the right to terminate this
Agreement without Cause at any time after thirty (30) days after Actual Receipt
of written notice by the Executive from the Corporation. Failure to renew this
Agreement shall not be deemed to be a termination of employment for purposes of
this Agreement. For purposes of this Agreement, "Actual Receipt" of notice shall
mean actual physical receipt (or refusal of acceptance) of notice by the
Executive; provided, however, that in the event the Executive has been away from
the office for more than two weeks and either the Executive's whereabouts are
unknown to the Corporation or the Executive is at a location where the
Corporation cannot reasonably communicate with him, the Executive will be deemed
to have refused delivery of notice on the day such notice is delivered (or
delivery is attempted) to the Executive's last known residence. In such
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event, the Corporation shall nonetheless provide a copy of the notice to the
Executive as soon as it is reasonably possible to do so.
(c) The Executive at his option, may terminate this Agreement for
Good Reason (as defined below) upon thirty (30) days' advance written notice by
the Executive to the Corporation, which notice shall reference this Section
20(c) and shall describe in reasonable detail the cause for such Good Reason.
Such termination shall be effective on the thirtieth (30th) day following the
Corporation's receipt of written notice from the Executive; provided, however,
that such termination shall not be effective if the Corporation has cured the
cause for such Good Reason to the Executive's reasonable satisfaction within
such thirty (30) day period. For purposes of this Section 20(c), "Good Reason"
shall mean any of the following:
i. A material breach of this Agreement by the Corporation;
ii. The Corporation's requiring the Executive to be based at
any office or location other than one within the Denver, Colorado metropolitan
area, except for required travel on the Corporation's business to an extent
substantially consistent with the Executive's obligations immediately prior to
the Effective Date;
iii. Any purported termination by the Corporation of the
Executive's employment other than as permitted in this Agreement, it being
understood that any such purported termination shall not be effective for any
purpose of this Agreement, and it being further understood that the nonrenewal
of this Agreement shall not be deemed to be a termination of employment for
purposes of this Agreement; or
iv. A material reduction in the character of the duties
assigned to the Executive or in the Executive's level of work responsibility,
unless mutually agreed upon by the Executive and the Corporation;
(d) The Executive shall have the right to terminate this Agreement
without cause at any time upon sixty (60) days' advance written notice to the
Corporation.
21. Rights Upon Termination.
(a) Upon termination of the Executive's employment with the
Corporation, the Corporation shall have no further obligation to the Executive
except as specifically provided under this Agreement. Termination of the
Executive's employment shall not affect the Executive's right to receive any
compensation or bonuses which have accrued but have not been paid through the
date of termination, including, but not limited to, the Incentive Bonus for that
portion of the calendar year prior to the termination.
(b) In addition to any accrued compensation or bonuses, and
depending upon the circumstances of the Executive's termination of employment,
the Corporation shall pay or provide certain severance benefits (the "Severance
Benefits"). The nature
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and extent of the Severance Benefits to be provided shall be determined in
accordance with the table set forth in Exhibit A attached hereto. For purposes
of Exhibit A, the following terms shall have the following meanings:
(1) "Severance Pay" shall be expressed as a monthly amount
and shall mean one-twelfth of the Executive's annual base salary
pursuant to Section 3 at the rate in effect immediately prior to the
termination of employment. Any Severance Pay due to the Executive shall
be paid in cash in a single lump sum within sixty (60) days after the
termination of employment.
(2) "Continuation Benefits" shall mean the continuation of
the Benefits, including any Benefits which cover the Executive's
family, but excluding any contribution to any qualified pension, profit
sharing or retirement plan or other deferred compensation arrangement.
(3) A "Change in Control" shall mean and shall be deemed to
have occurred if (i) any of the following events shall have occurred,
and (ii) the occurrence of such event is not within one (1) year after
a failure of the Corporation to meet the operating targets for any two
of revenues, bookings, and EBITDA, as set forth in the Annual Operating
Plan (as defined in Section 21(b)(5) below), for any three (3) out of
any five (5) consecutive quarters:
(a) A Third Person (as defined below), including a
"group" as defined in Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended from time to time, and any successor act (the
"Exchange Act"), becomes the "beneficial owner," as defined in the
Exchange Act, of shares of the Corporation having 50% or more of the
total number of votes that may be cast for the election of any of the
Directors of the Corporation; or
(b) At least two-thirds of the directors of the
Corporation constitute persons who were not, at the time of their first
election to the Board of Directors of the Corporation, candidates
proposed by a majority of the Board of Directors in office prior to the
time of such first election; or
(c) The Board of Directors or the stockholder(s) of the
Corporation approve: (i) any agreement for a merger or consolidation or
like business recombination or reorganization of the Corporation with
another entity, the consummation of which would result in the
occurrence of any event described in Section 21(b)(6)(a) or (b) above
or (ii) any sale, exchange or other disposition of all or substantially
all of the Corporation's assets; or
(d) Any sale, exchange or other disposition of greater
than 67% in fair market value of the Corporation's total assets, other
than in the ordinary course of business, whether in a single
transaction or a series of related transactions; provided, however,
that no sale or disposition of assets shall be
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taken into account to the extent that the proceeds of such sale or
disposition (whether in cash or in-kind) are reinvested or are, in the
case of proceeds received in-kind, used in the ongoing conduct of the
Corporation, provided further that such a reinvestment shall not be
deemed to have occurred unless made within six (6) months of such sale
or disposition and provided further that, the term reinvestment shall
include the use of proceeds to repay debt incurred in connection with
the operation of the business in which the assets sold or disposed of
were used; or
(e) Any other event which the Board of Directors,
including at least one Investor Director, determines, in its
discretion, would materially alter the structure of the Corporation or
its ownership.
A Change in Control shall be deemed to have occurred on the effective
date of such Change in Control; provided, however, that anything in
this Agreement to the contrary notwithstanding, if the Executive's
employment with the Corporation is terminated during the six (6) months
prior to a Change in Control and the Executive can reasonably
demonstrate that such termination (a) was at the request of a third
party who has taken steps reasonably calculated to effect the Change in
Control, or (b) otherwise arose in connection with the Change in
Control, then for all purposes of this Agreement, the Change in Control
shall be deemed to have occurred on the date immediately prior to the
date of such termination. For purposes of determining whether there has
been a Change in Control, the Third Person owning shares must be
someone other than a person or entity, or an Affiliate of a person or
entity, that, as of the Effective Date, was the beneficial owner of
shares of the Corporation having 25% or more of the total number of
votes that may be cast for the election of any of the Directors of the
Corporation. "Affiliate" shall mean, with respect to any person or
entity, a person or entity that directly or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common
control with, such person or entity.
(4) Annual Operating Plan. On or before December 15 of the
preceding calendar year, management of the Corporation shall prepare in
good faith and submit to the Board of Directors, and the Board of
Directors shall adopt, an annual business plan for the Corporation. In
preparing the annual business plan, management shall consider, among
other factors, the past performance of the Corporation and the
Corporation's current outlook based upon the Corporation's backlog and
such other factors as management shall deem appropriate. Upon adoption
by the Board of Directors by a majority vote, provided that the CEO and
at least one Investor Director (assuming that there are then such
members on the Board of Directors) must have voted in favor of
adoption, the annual business plan shall be the "Annual Operating Plan"
for purposes of this Agreement. If the Board of Directors (including
the CEO and at least one Investor Director) fails to approve the annual
business plan as set forth herein, the plan for the prior year
multiplied by 140% shall be the "Annual Operating Plan" for purposes of
this Agreement. Notwithstanding the foregoing, the Annual Operating
Plan to be used for purposes of calendar year 1999 shall be the annual
business plan adopted
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by the Corporation's Board of Directors on December 14, 1998, as
amended by the Corporation's Forecast dated May 23, 1999.
(c) Upon termination of this Agreement by mutual agreement of the
parties, or by the Corporation other than for Cause pursuant to Section 20(a),
or by the Executive for any reason whatsoever, the Corporation shall, both
verbally and in writing, acknowledge that the Executive performed the services
provided under this Agreement in a good and proficient manner and shall provide
a positive reference to any person or entity that may request a reference with
regard to the Executive.
(d) Upon the termination of the Executive's employment with the
Corporation for any reason other than by the Corporation for Cause pursuant to
Section 20(a), the Executive shall be entitled to keep, free and clear of any
liens and encumbrances and any claim of title by the Corporation, (i) equipment
owned by the Corporation and used by the Executive with the approval of the
Corporation in the Executive's home, to the extent that the value of such
equipment does not exceed $10,000, and (ii) the automobile provided by the
Corporation for the Executive's use.
(e) If any portion of the Benefits (excluding any contributions to
any Retirement Plan) cannot reasonably be made available to the Executive, then
the Corporation shall pay to the Executive an amount in cash equal to 150% of
the cost which must be incurred by the Executive to acquire benefits equivalent
to any tax-exempt Benefits previously provided by the Corporation and 100% of
the cost which must be incurred by the Executive to acquire benefits equivalent
to any taxable Benefits previously provided by the Corporation. The Corporation
shall determine the cost to the Executive of such Benefits in good faith and
shall provide reasonable documentation to support its findings to the Executive.
22. Default in Payments. If any payment is due and payable to the
Executive under Section 21 and such payment is not made when due and such
non-payment continues for a period of ten (10) days after written notice thereof
from the Executive to the Corporation, which notice describes such payment
default and references this Section 22, the following shall occur:
(a) The Executive shall be immediately released from Section 13
hereof regarding non-competition; and
(b) The Executive shall retain all other rights and remedies
against the Corporation.
23. Mitigation. The Executive shall not be required to mitigate the
Corporation's obligations with respect to the provision of Continuation Benefits
or the payment of any amount described in this Agreement by seeking or accepting
any offer of employment or otherwise, nor shall the amount of any payment
hereunder be reduced by any compensation earned by the Executive as a result of
employment by another employer. Continuation Benefits shall be subject to
mitigation under the limited
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circumstances described in Exhibit A if and only if Executive, in his sole
discretion, has accepted employment with a third party and is eligible to
receive benefits which are equivalent in all material respects to the
Continuation Benefits. In determining benefit equivalence, the parties shall
consider all factors, including the level of coverage, the cost, if any, to the
Executive, and the effect, if any, of provisions limiting coverage for
pre-existing conditions.
24. Withholding Tax. The Corporation shall be entitled to withhold from
any compensatory payments which it makes to the Executive under this Agreement
or otherwise an amount sufficient to satisfy all Federal, state and local income
and employment tax withholding requirements with respect to any and all
compensation paid to the Executive by the Corporation.
25. Registration Rights. The Executive shall be entitled to
registration rights with respect to shares of Common Stock of the Corporation
held by the Executive as set forth in that certain Registration Rights Agreement
by and among the Corporation and the parties named therein dated as of August
13, 1999.
26. Arbitration. Any controversy or claim arising out of or related to
this Agreement shall be settled by arbitration in Englewood, Colorado, under the
Commercial Rules of the American Arbitration Association in effect at the time
such controversy or claim arises (the "Rules") by one arbitrator appointed by
the American Arbitration Association in accordance with the Rules, the
arbitrator also apportioning the costs of arbitration. The award of the
arbitrator shall be in writing, shall be final and binding upon the Parties,
shall not be appealed from or contested in any court and may, in appropriate
circumstances, include injunctive relief. Should any Party fail to appear or be
represented at the arbitration proceedings after due notice in accordance with
the Rules, then the arbitrator may nevertheless render a decision in the absence
of said Party, and such decision shall have the same force and effect as if the
absent Party had been present, whether or not it shall be adverse to the
interests of that Party. Any award rendered hereunder may be entered for
enforcement, if necessary, in any court of competent jurisdiction, and the Party
against whom enforcement is sought shall bear the expenses, including attorneys'
fees, of enforcement. Notwithstanding the foregoing, the Corporation shall be
entitled to seek injunctive or other equitable relief to enforce any of the
provisions in Sections 7 through 13 from any court of competent jurisdiction
without the need to resort to arbitration.
27. Survival. The covenants contained in this Agreement shall survive
any termination of the Executive's employment with the Corporation and shall
survive any termination of this Agreement. The existence of any claim or cause
of action of the Executive against the Corporation, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by the
Corporation of any of the covenants contained in this Agreement.
28. Severability. If the scope of any restriction contained in this
Agreement is too broad to permit enforcement of such restriction to its fullest
extent, then such
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restriction shall be enforced to the maximum extent permitted by law, and the
Executive and the Corporation hereby consent and agree that the scope of such
restriction may be judicially modified in any proceeding brought to enforce such
restriction. To the extent any provision of this Agreement shall be invalid or
unenforceable, it shall be considered deleted from this Agreement and the
remainder of this Agreement shall remain in full force and effect. In
furtherance and not in limitation of the foregoing, should the duration or
geographical extent of or business activities covered by any provision of this
Agreement be in excess of that which is valid and enforceable under applicable
law, then such provision shall be construed to cover only that duration or
extent or those activities which may validly and enforceably be covered.
29. Subsidiaries. The "subsidiaries" of the Corporation as that term is
used in this Agreement include Utility Graphics Consultants Corporation, Graphic
Data Systems Corporation and their subsidiaries, together with any other
corporation in which the Corporation or its subsidiaries hold more than a fifty
percent (50%) interest at any time during the term of this Agreement.
30. Notice. Any notices required or permitted to be given under this
Agreement shall be sufficient if in writing and delivered by personal delivery,
air courier, or if mailed by registered or certified first-class mail, return
receipt requested, to the residence of the Executive as it appears in the
corporate records for notice to the Executive, or to the principal office of the
Corporation for notice to the Corporation. All notices delivered in accordance
with this Section shall be deemed to have been received and shall be deemed
effective if delivered in person or by air courier, upon actual receipt by the
intended recipient, or if mailed, upon the date of delivery or refusal to accept
delivery as shown by the return receipt therefor.
31. No Waiver. No term or condition of this Agreement shall be deemed
to have been waived, nor shall there be any estoppel to enforce any provision of
this Agreement, except by a statement in writing signed by the Party against
whom enforcement of the waiver or estoppel is sought. Any written waiver shall
not be deemed a continuing waiver unless specifically stated, and shall operate
only as to the specific term or condition waived and shall not constitute a
waiver of such term or condition for the future or as to any act other than that
specifically waived.
32. Amendments. No amendment or modification of this Agreement shall be
deemed effective unless made in writing and signed by the Parties hereto.
33. Assignment. The rights and obligations of the Corporation under
this Agreement shall, with the prior written consent of the Executive, inure to
the benefit of and be binding upon the successors and assigns of the
Corporation. If the Corporation shall at any time be merged or consolidated with
any other corporation or shall sell or otherwise transfer a substantial portion
of its assets to another corporation or entity, the provisions of this Agreement
shall be binding upon and inure to the benefit of the corporation or entity
surviving or resulting from such merger or consolidation or to which such assets
have been sold or transferred. Upon the Executive's request, the
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Corporation shall obtain an agreement to expressly assume this Agreement from
any such successor. This is a personal service contract and may not be assigned
by the Executive.
34. Entire Agreement. This instrument contains the entire agreement of
the Parties relating to the subject matter hereof and supersedes all prior
agreements and understandings with respect to such subject matter, whether oral
or written, and all other communications relating to the subject matter hereof,
including, but not limited to, the Amended and Restated Employment Agreement
between the Executive and the Corporation dated December 31, 1997, and the
Parties hereto have made no agreements, representations or warranties relating
to the subject matter of this Agreement that are not set forth herein.
35. Governing Law. This Agreement is made under and shall be governed
by and construed in accordance with the internal laws of the State of Colorado
applicable to agreements made and to be performed entirely within such State,
without regard to the conflicts of law principles of such State.
36. Headings. The headings of sections in this Agreement are solely for
convenience of reference and shall not control the meaning or interpretation of
any provision of this Agreement.
Signed by the Parties on the day and year first above written.
"CORPORATION"
CONVERGENT GROUP CORPORATION
By: /s/ XXXXX X. XXXXXXXXXX, XX.
----------------------------------
Xxxxx X. Xxxxxxxxxx, Xx.
Chief Executive Officer
"EXECUTIVE"
/s/ XXXXX X. XXXXXXXX
-------------------------------------
Xxxxx X. Xxxxxxxx
Executive
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EXHIBIT A
TO
EMPLOYMENT AGREEMENT
BETWEEN
XXXXX X. XXXXXXXX
AND
CONVERGENT GROUP CORPORATION
TABLE OF SEVERANCE BENEFITS
---------------------------
ADDITIONAL
EVENT OF ADDITIONAL MONTHS OF MONTHS OF
CONTINUATION BENEFITS SEVERANCE PAY
---------------------- ------------------------ -----------------
1. BY 0 0
CORPORATION
FOR CAUSE
-----------------------------------------------------------------
2. BY 6 6
CORPORATION
WITHOUT
CAUSE
-----------------------------------------------------------------
3. BY 6 6
EXECUTIVE
WITH GOOD
REASON
-----------------------------------------------------------------
4. BY
EXECUTIVE
WITHOUT
GOOD
REASON
A) PRIOR TO A 0 0
CHANGE IN
CONTROL
B) AFTER A 6 6
CHANGE IN
CONTROL
-----------------------------------------------------------------
5. DISABILITY 6 6
-----------------------------------------------------------------
6. DEATH 6 0
-----------------------------------------------------------------
A-1
21
EXHIBIT B
TO
EMPLOYMENT AGREEMENT
BETWEEN
XXXXX X. XXXXXXXX
AND
CONVERGENT GROUP CORPORATION
EXECUTIVE'S ANNUAL OPERATING PLAN
---------------------------------
DENVER:0930222.06
D-1
